The Federal Government (FG) has yet again approved the disbursement of 600 billion Naira as a bail out fund for the power sector to avoid the collapse of the sector despite its unprecedented level of inefficiency and estimated billing for “supply” of darkness to consumers. Without this, the GenCos will have to shut down power stations and will be out of business. But why?
The financial health of the power supply value chain depends on money collections by the distribution companies (DisCos) being faithfully remitted to the Nigerian Bulk Electricity Trader (NBET) to care for the investment and operational expenditure of gas suppliers, generating companies (GenCos), transmission company of Nigeria (TCN), distribution companies (DisCos), market operator, (MO), the Nigerian Electricity Regulatory Commission (NERC), NBET and other participants in the Nigerian electricity market. Since the DisCos do not pay more than 30% of the total invoice received for the actual energy allocated to them and certainly do not remit all the money they are collecting from customers to the NBET, we have a liquidity problem in the NESI. This has led FG, in keeping the power sector as an on-going concern (not sustainable in the manner it is being done), to provide bail out funds so far including 213billion in September, 2014, 701billion in March, 2017, and now the 600billion Naira in September, 2019. As it stands, more bail out funds or interventions will come except something drastic is done to stem this tide. No doubt, this is a huge price to pay for the reckless manner in which the privatization of the electricity supply industry was carried out. The main problem is that those who mediated the process gambled their way through because they have no knowledge of power systems. The other problem is the Nigerian factor. Corruption in the power sector and in the wider Nigerian society left the country with no choice but to break the monopoly of the moribund liability called NEPA. However, to privatize the Nigerian Electricity Supply Industry ( NESI), Nigeria should have put in her best brains in the sector; people who have demonstrable experience in power systems. This in explicit terms would mean people who have professional and cognate experience in the power sector especially in and out of Nigeria. Power systems is for particularly brilliant people and cannot be delivered by mediocres. Instead, the government underestimated the importance of what is a technically complex system and left it for politicians, lawyers, accountants, economists and cronies to handle. It won’t work that way!
Truth be told, it is not uncommon to find governments worldwide subsidising the power sector. However, they don’t make it a permanent feature. It is the manner it is being done here that I worry about same as one worries over the subsidy of petroleum products.
Subsidy into the pockets of individuals and for encouraging inefficiency is wrong. Rather than fix the system that is causing us the paradoxical subsidy (refineries in the case of oil; transmission and distribution networks in the case of power), we dole out “subsidy” to gladiators for unverifiable expenditures.
It is not in the interest of government to be disbursing bailout funds to power firms without commensurate improvements in the supply of electricity. A more stringent process that would allow only competent and qualified firms to execute power projects is required.
As I said five years ago, an output-based, performance incentive model is what is best. Earlier this year, I have reiterated this position and documented how it should work in writing to the FG, the Ministry of Power, NERC, and the Bureau of Public Enterprises (BPE).
